Rupee movement ‘orderly’ in FY23 so far, reflects fundamentals: RBI Governor Das

RBI Governor Shaktikanta Das. (File photo)

The Indian rupee has moved in an "orderly" fashion against the dollar so far in this financial year and is reflecting global and domestic fundamentals, the Reserve Bank of India Governor said on September 5.

“It (rupee) has held its own in a world of sharp depreciation across other EME (emerging economies) and AE (advanced economies) currencies,” Shaktikanta Das said at an event organised by the Fixed Income Money Market and Derivatives Association of India (FIMMDA).

Das elaborated that while the US dollar has appreciated by 11.8 percent during the current financial year so far, the rupee has depreciated by 5.1 percent, which is among the lowest in the world.

The Indian rupee had slipped to a record low of 80.065 to the dollar in July as several central banks across the world tightened monetary policy to curb record inflation rates, shrinking the global liquidity pool. Widening trade deficit in India also put pressure on the local unit.

The RBI, as a market regulator, is responsible to prevent wild fluctuations in the rupee. Whenever the rupee has depreciated significantly, the RBI has stepped in the market by selling dollars from its forex kitty, according to money market participants.

Also read: Monetary policy will remain watchful, nimble-footed, calibrated: RBI Governor

Das said on September 5 that the RBI has been present in the market on a “regular basis”, providing liquidity and confidence so as to facilitate its smooth and normal functioning. Exchange rate stability is an intrinsic element of the RBI’s overall macroeconomic and financial stability, he added.

The RBI’s endeavour, amidst the extraordinary events unfolding globally on an ongoing basis, has been to anchor expectations and allow the exchange rate to reflect the fundamentals rather than overshoot, the governor said. Moreover, India’s foreign exchange reserves of $561 billion as on August 26 provide a cushion against external shocks, as is being demonstrated on a day-to-day basis, Das said. Moreover, the reserves are also reinforced by forward assets, he added.

“Avoiding undue and excessive volatility is a desirable policy objective for all stakeholders, while reaping the benefits of a market determined exchange rate regime,” Das said.

Meanwhile, the government and the RBI are putting in place a framework for issuance of sovereign green bonds, in line with global standards.

Announced by Finance Minister Nirmala Sitharaman in her FY23 budget speech in February, the green bonds will be part of this year's record gross borrowing budget estimate of Rs 14.95 lakh crore.

“Issuance of green bonds provides a strong signal of a country’s commitment to a low-carbon economy,” governor Das said, adding that it also helps in bringing down the cost of capital for green projects.